Employee Appreciation Day: Easing the pain of recessional cost cutting

As we stare into the face of a recession, many businesses will be thinking about cost-cutting measures to secure their financial future.

On the back of a global pandemic, which bought both financial and emotional challenges for many, traditional tactics will be even more of a concern for many employees. However, research from the University of Kent’s Business School can be used to advise businesses facing tough financial decisions.

Professor Chidiebere Ogbonnaya, Head of Department of Leadership & Management at Kent Business School explains how engaging employees in a transparent and two-way conversation about salary and perk disruption fuelled by recession could boost morale and save funds. 

“When faced with financially challenging times, such as a recession, the knee jerk reaction of many businesses is to target human resources for cutbacks. Trimming training budgets, pulling perks and reducing recruitment may all provide short-term solutions for the company’s bottom line, but our research reveals that this comes at a cost.

“Employees feel betrayed and unappreciated and relationships with managers become strained, leading to lower productivity and an increase in grievances and time and money spent on arbitration.

“While not every manager will have the luxury of avoiding these cuts, our research demonstrates there is a way to minimise the effect on the employment relations climate. And it’s a relatively simple solution – communication and involving employees in decision-making.

“When consultation is more than lip-service our findings show that employees are more likely to accept management’s adoption of cost-cutting actions as an inevitable response to economic uncertainty and also to have a shared perspective on the employment relationship.

“For any manager faced with difficult decisions about where to find savings, our advice is clear. Instead of making a quick decision based on the obvious options, take the time to look at all possibilities. And if you’ve exhausted all options and the only answer lies in human resources cuts, take the time to engage employees. Be open and honest and make them part of the decision-making process.

“Keep employees informed about changes to staffing, budgets and finances through regular newsletters and staff forums. Employees want to know why and how the changes will affect their jobs, whether good or bad. Before making decisions, have open consultations, seek employees’ views, and respond to any concerns they might have. These are tough choices, but failing to consider well-being trade-offs may harm employee morale.”

“While there is no silver bullet for business facing financial challenges, our research suggests there are ways to strike a balance between cost-cutting and employer relations and wellbeing – ensuring a long-term future for the company as well as short-term bottom-line improvements.”

Chidi’s full research can be found here.

Photo (top of article) by Annie Spratt on Unsplash

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